Nichols Accountinghttp://www.nicholsaccounting.com
Proactive Tax and Growth Planning in Boise, Nampa, Ontario, Treasure ValleyThu, 15 Feb 2018 20:29:00 +0000en-UShourly1https://wordpress.org/?v=4.6.10Highlights of the New Tax Reform Lawhttp://www.nicholsaccounting.com/highlights-new-tax-reform-law/
http://www.nicholsaccounting.com/highlights-new-tax-reform-law/#respondThu, 21 Dec 2017 16:41:20 +0000http://www.nicholsaccounting.com/?p=5236The new tax reform law, commonly called the “Tax Cuts and Jobs Act” (TCJA), is the biggest federal tax law overhaul in 31 years, and it has both good and bad news for taxpayers. Below are highlights of some of the most significant changes affecting individual and business taxpayers. Except where noted, these changes are […]

]]>The new tax reform law, commonly called the “Tax Cuts and Jobs Act” (TCJA), is the biggest federal tax law overhaul in 31 years, and it has both good and bad news for taxpayers.

Below are highlights of some of the most significant changes affecting individual and business taxpayers. Except where noted, these changes are effective for tax years beginning after December 31, 2017.

Individuals

Drops of individual income tax rates ranging from 0 to 4 percentage points (depending on the bracket) to 10%, 12%, 22%, 24%, 32%, 35% and 37% — through 2025

Near doubling of the standard deduction to $24,000 (married couples filing jointly), $18,000 (heads of households), and $12,000 (singles and married couples filing separately) — through 2025

Elimination of personal exemptions — through 2025

Doubling of the child tax credit to $2,000 and other modifications intended to help more taxpayers benefit from the credit — through 2025

Elimination of the individual mandate under the Affordable Care Act requiring taxpayers not covered by a qualifying health plan to pay a penalty — effective for months beginning after December 31, 2018

Reduction of the adjusted gross income (AGI) threshold for the medical expense deduction to 7.5% for regular and AMT purposes — for 2017 and 2018

New $10,000 limit on the deduction for state and local taxes (on a combined basis for property and income taxes; $5,000 for separate filers) — through 2025

Reduction of the mortgage debt limit for the home mortgage interest deduction to $750,000 ($375,000 for separate filers), with certain exceptions — through 2025

Elimination of the deduction for interest on home equity debt — through 2025

Elimination of the personal casualty and theft loss deduction (with an exception for federally declared disasters) — through 2025

Elimination of miscellaneous itemized deductions subject to the 2% floor (such as certain investment expenses, professional fees and unreimbursed employee business expenses) — through 2025

Elimination of the AGI-based reduction of certain itemized deductions — through 2025

Elimination of the moving expense deduction (with an exception for members of the military in certain circumstances) — through 2025

Expansion of tax-free Section 529 plan distributions to include those used to pay qualifying elementary and secondary school expenses, up to $10,000 per student per tax year

AMT exemption increase, to $109,400 for joint filers, $70,300 for singles and heads of households, and $54,700 for separate filers — through 2025

Doubling of the gift and estate tax exemptions, to $10 million (expected to be $11.2 million for 2018 with inflation indexing) — through 2025

Businesses

Replacement of graduated corporate tax rates ranging from 15% to 35% with a flat corporate rate of 21%

Repeal of the 20% corporate AMT

New 20% qualified business income deduction for owners of flow-through entities (such as partnerships, limited liability companies and S corporations) and sole proprietorships — through 2025

Doubling of bonus depreciation to 100% and expansion of qualified assets to include used assets — effective for assets acquired and placed in service after September 27, 2017, and before January 1, 2023

Doubling of the Section 179 expensing limit to $1 million and an increase of the expensing phaseout threshold to $2.5 million

Other enhancements to depreciation-related deductions

New disallowance of deductions for net interest expense in excess of 30% of the business’s adjusted taxable income (exceptions apply)

New limits on net operating loss (NOL) deductions

Elimination of the Section 199 deduction, also commonly referred to as the domestic production activities deduction or manufacturers’ deduction — effective for tax years beginning after December 31, 2017, for noncorporate taxpayers and for tax years beginning after December 31, 2018, for C corporation taxpayers

New rule limiting like-kind exchanges to real property that is not held primarily for sale

New tax credit for employer-paid family and medical leave — through 2019

New limitations on excessive employee compensation

New limitations on deductions for employee fringe benefits, such as entertainment and, in certain circumstances, meals and transportation

More to consider

This is just a brief overview of some of the most significant TCJA provisions. There are additional rules and limits that apply, and the law includes many additional provisions. Contact us today to learn more about how these and other tax law changes will affect you in 2018 and beyond.

Contact Us

]]>http://www.nicholsaccounting.com/highlights-new-tax-reform-law/feed/0401(k) Retirement Plan Contribution Limit Increases for 2018http://www.nicholsaccounting.com/401k-retirement-plan-contribution-limit-increases-2018/
http://www.nicholsaccounting.com/401k-retirement-plan-contribution-limit-increases-2018/#respondTue, 19 Dec 2017 20:32:08 +0000http://www.nicholsaccounting.com/?p=5233Retirement plan contribution limits are indexed for inflation, but with inflation remaining low, most of the limits remain unchanged for 2018. But one piece of good news for taxpayers who’re already maxing out their contributions is that the 401(k) limit has gone up by $500. The only other limit that has increased from the 2017 […]

]]>Retirement plan contribution limits are indexed for inflation, but with inflation remaining low, most of the limits remain unchanged for 2018. But one piece of good news for taxpayers who’re already maxing out their contributions is that the 401(k) limit has gone up by $500. The only other limit that has increased from the 2017 level is for contributions to defined contribution plans, which has gone up by $1,000.

If you’re not already maxing out your contributions to other plans, you still have an opportunity to save more in 2018. And if you turn age 50 in 2018, you can begin to take advantage of catch-up contributions.

Higher-income taxpayers should also be pleased that some limits on their retirement plan contributions that had been discussed as part of tax reform didn’t make it into the final legislation.

However, keep in mind that there are still additional factors that may affect how much you’re allowed to contribute (or how much your employer can contribute on your behalf). For example, income-based limits may reduce or eliminate your ability to make Roth IRA contributions or to make deductible traditional IRA contributions.

If you have questions about how much you can contribute to tax-advantaged retirement plans in 2018, check with us.

]]>http://www.nicholsaccounting.com/401k-retirement-plan-contribution-limit-increases-2018/feed/0Accountants….Dancing???http://www.nicholsaccounting.com/accountants-dancing/
http://www.nicholsaccounting.com/accountants-dancing/#commentsFri, 01 Dec 2017 23:37:08 +0000http://www.nicholsaccounting.com/?p=5167Annually, The Nichols Accounting Group creates a holiday video to wish you, your families, and your employees, a very, Merry Christmas. This year, the holiday spirit has us overjoyed and yes, we’re dancing. We’re sorry. During this time, in lieu of gifts, the Firm selects a community organization to support and makes a gift in your honor. We […]

]]>Annually, The Nichols Accounting Group creates a holiday video to wish you, your families, and your employees, a very, Merry Christmas. This year, the holiday spirit has us overjoyed and yes, we’re dancing. We’re sorry.

During this time, in lieu of gifts, the Firm selects a community organization to support and makes a gift in your honor. We appreciate you and want to celebrate by giving back in your name. Thank you for 43 years.

We wish you and yours a very, Merry Christmas!

If you’d like to join us in supporting The Boys and Girls Club, click a link below to give now.

]]>http://www.nicholsaccounting.com/accountants-dancing/feed/10Accelerate Your Retirement Savings With a Cash Balance Planhttp://www.nicholsaccounting.com/accelerate-retirement-savings-cash-balance-plan/
http://www.nicholsaccounting.com/accelerate-retirement-savings-cash-balance-plan/#respondWed, 11 Oct 2017 17:11:08 +0000http://www.nicholsaccounting.com/?p=5145Business owners may not be able to set aside as much as they’d like in tax-advantaged retirement plans. Typically, they’re older and more highly compensated than their employees, but restrictions on contributions to 401(k) and profit-sharing plans can hamper retirement-planning efforts. One solution may be a cash balance plan. Defined benefit plan with a twist […]

Business owners may not be able to set aside as much as they’d like in tax-advantaged retirement plans. Typically, they’re older and more highly compensated than their employees, but restrictions on contributions to 401(k) and profit-sharing plans can hamper retirement-planning efforts. One solution may be a cash balance plan.

Defined benefit plan with a twist

The two most popular qualified retirement plans — 401(k) and profit-sharing plans — are defined contribution plans. These plans specify the amount that goes into an employee’s retirement account today, typically a percentage of compensation or a specific dollar amount.

In contrast, a cash balance plan is a defined benefit plan, which specifies the amount a participant will receive in retirement. But unlike traditional defined benefit plans, such as pensions, cash balance plans express those benefits in the form of a 401(k)-style account balance, rather than a formula tied to years of service and salary history.

The plan allocates annual “pay credits” and “interest credits” to hypothetical employee accounts. This allows participants to earn benefits more uniformly over their careers, and provides a clearer picture of benefits than a traditional pension plan.

Greater savings for owners

A cash balance plan offers significant advantages for business owners — particularly those who are behind on their retirement saving and whose employees are younger and lower-paid. In 2017, the IRS limits employer contributions and employee deferrals to defined contribution plans to $54,000 ($60,000 for employees age 50 or older). And nondiscrimination rules, which prevent a plan from unfairly favoring highly compensated employees (HCEs), can reduce an owner’s contributions even further.

But cash balance plans aren’t bound by these limits. Instead, as defined benefit plans, they’re subject to a cap on annual benefit payouts in retirement (currently, $215,000), and the nondiscrimination rules require that only benefits for HCEs and non-HCEs be comparable.

Contributions may be as high as necessary to fund those benefits. Therefore, a company may make sizable contributions on behalf of owner/employees approaching retirement (often as much as three or four times defined contribution limits), and relatively smaller contributions on behalf of younger, lower-paid employees.

There are some potential risks. The most notable one is that, unlike with profit-sharing plans, you can’t reduce or suspend contributions during difficult years. So, before implementing a cash balance plan, it’s critical to ensure that your company’s cash flow will be steady enough to meet its funding obligations.

Right for you?

Although cash balance plans can be more expensive than defined contribution plans, they’re a great way to turbocharge your retirement savings. We can help you decide whether one might be right for you.

Contact Us

]]>http://www.nicholsaccounting.com/accelerate-retirement-savings-cash-balance-plan/feed/0Summer is a Good Time to Start Your 2017 Tax Planning and Organize Your Tax Recordshttp://www.nicholsaccounting.com/summer-good-time-start-2017-tax-planning-organize-tax-records/
http://www.nicholsaccounting.com/summer-good-time-start-2017-tax-planning-organize-tax-records/#respondWed, 05 Jul 2017 15:34:24 +0000http://www.nicholsaccounting.com/?p=5118You may be tempted to forget all about taxes during summertime, when “the livin’ is easy,” as the Gershwin song goes. But if you start your tax planning now, you may avoid an unpleasant tax surprise when you file next year. Summer is also a good time to set up a storage system for your […]

]]>You may be tempted to forget all about taxes during summertime, when “the livin’ is easy,” as the Gershwin song goes. But if you start your tax planning now, you may avoid an unpleasant tax surprise when you file next year. Summer is also a good time to set up a storage system for your tax records. Here are some tips:

Take action when life changes occur. Some life events (such as marriage, divorce, or the birth of a child) can change the amount of tax you owe. When they happen, you may need to change the amount of tax withheld from your pay. To do that, file a new Form W-4 with your employer. If you make estimated payments, those may need to be changed as well.

Keep records accessible but safe. Put your 2016 tax return and supporting records together in a place where you can easily find them if you need them, such as if you’re ever audited by the IRS. You also may need a copy of your tax return if you apply for a home loan or financial aid. Although accessibility is important, so is safety.

A good storage medium for hard copies of important personal documents like tax returns is a fire-, water- and impact-resistant security cabinet or safe. You may want to maintain a duplicate set of records in another location, such as a bank safety deposit box. You can also store copies of records electronically. Simply scan your documents and save them to an external storage device (which you can keep in your home safe or bank safety deposit box). If opting for a cloud-based backup system, choose your provider carefully to ensure its security measures are as stringent as possible.

Stay organized. Make tax time easier by putting records you’ll need when you file in the same place during the year. That way you won’t have to search for misplaced records next February or March. Some examples include substantiation of charitable donations, receipts from work-related travel not reimbursed by your employer, and documentation of medical expenses not reimbursable by insurance or paid through a tax-advantaged account.

]]>http://www.nicholsaccounting.com/summer-good-time-start-2017-tax-planning-organize-tax-records/feed/0Pay Attention to the Details When Selling Investmentshttp://www.nicholsaccounting.com/pay-attention-details-selling-investments/
http://www.nicholsaccounting.com/pay-attention-details-selling-investments/#respondMon, 26 Jun 2017 17:34:11 +0000http://www.nicholsaccounting.com/?p=5111The tax consequences of the sale of an investment, as well as your net return, can be affected by a variety of factors. You’re probably focused on factors such as how much you paid for the investment vs. how much you’re selling it for, whether you held the investment long-term (more than one year) and […]

The tax consequences of the sale of an investment, as well as your net return, can be affected by a variety of factors. You’re probably focused on factors such as how much you paid for the investment vs. how much you’re selling it for, whether you held the investment long-term (more than one year) and the tax rate that will apply.

But there are additional details you should pay attention to. If you don’t, the tax consequences of a sale may be different from what you expect. Here are a few details to consider when selling an investment:

Which shares you’re selling. If you bought the same security at different times and prices and want to sell high-tax-basis shares to reduce gain or increase a loss to offset other gains, be sure to specifically identify which block of shares is being sold.

Trade date vs. settlement date. When it gets close to year end, keep in mind that the trade date, not the settlement date, of publicly traded securities determines the year in which you recognize the gain or loss.

Transaction costs. While transaction costs, such as broker fees, aren’t taxes, like taxes they can have a significant impact on your net returns, especially over time, because they also reduce the amount of money you have available to invest.

If you have questions about the potential tax impact of an investment sale you’re considering — or all of the details you should keep in mind to minimize it — please contact us.

]]>http://www.nicholsaccounting.com/pay-attention-details-selling-investments/feed/02017 Q3 Tax Calendar: Key deadlines for businesses and other employershttp://www.nicholsaccounting.com/2017-q3-tax-calendar-key-deadlines-businesses-employers/
http://www.nicholsaccounting.com/2017-q3-tax-calendar-key-deadlines-businesses-employers/#respondMon, 26 Jun 2017 17:28:03 +0000http://www.nicholsaccounting.com/?p=5108Here are some of the key tax-related deadlines affecting businesses and other employers during the second quarter of 2017. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you. Contact us to ensure you’re meeting all applicable deadlines and to learn more about the filing requirements. July […]

]]>Here are some of the key tax-related deadlines affecting businesses and other employers during the second quarter of 2017. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you. Contact us to ensure you’re meeting all applicable deadlines and to learn more about the filing requirements.

]]>http://www.nicholsaccounting.com/2017-q3-tax-calendar-key-deadlines-businesses-employers/feed/0Our New Nampa Office!http://www.nicholsaccounting.com/moving-nampa-office/
http://www.nicholsaccounting.com/moving-nampa-office/#respondMon, 26 Jun 2017 16:16:00 +0000http://www.nicholsaccounting.com/?p=5105Our Nampa Idaho Center location served us well, but our growth required a change. That change comes in the form of a new building to hold our expanding work family. The Firm was started by Pete Nichols in January of 1974, and 43 years later, we have 32 employees, with additional seasonal help during tax season. […]

Our Nampa Idaho Center location served us well, but our growth required a change. That change comes in the form of a new building to hold our expanding work family. The Firm was started by Pete Nichols in January of 1974, and 43 years later, we have 32 employees, with additional seasonal help during tax season. The Firm continues to focus on proactive planning to help our clients grow wealth, save taxes and minimize risk. The new office is located just down the street from our former office. Nampa’s Garrity exit is convenient and central to the valley for many of our clients and we’re excited to call this new place our home. The Firm will host an open-house on September 21st from 3:00 – 6:00, with a Nampa Chamber Ribbon Cutting at 4:00.

Please note our new address:

Nichols Accounting, Nampa Office

6075 Hunt Avenue

Nampa, ID 83687

Phone: 208.442.0188 (same as before)

Our new office beams with natural light, earthy materials, plenty of meeting space, and room to grow. We look forward to sharing this space with you.

From our current location, head west on E. Franklin Road, head north on Idaho Center Boulevard, and turn west onto East Hunt Avenue

]]>http://www.nicholsaccounting.com/moving-nampa-office/feed/0The “Manufacturers’ Deduction” isn’t Just for Manufacturershttp://www.nicholsaccounting.com/manufacturers-deduction-isnt-just-manufacturers/
http://www.nicholsaccounting.com/manufacturers-deduction-isnt-just-manufacturers/#respondWed, 17 May 2017 21:58:28 +0000http://www.nicholsaccounting.com/?p=5102The Section 199 deduction is intended to encourage domestic manufacturing. In fact, it’s often referred to as the “manufacturers’ deduction.” But this potentially valuable tax break can be used by many other types of businesses besides manufacturing companies. Sec. 199 deduction 101 The Sec. 199 deduction, also called the “domestic production activities deduction,” is 9% […]

]]>The Section 199 deduction is intended to encourage domestic manufacturing. In fact, it’s often referred to as the “manufacturers’ deduction.” But this potentially valuable tax break can be used by many other types of businesses besides manufacturing companies.

Sec. 199 deduction 101

The Sec. 199 deduction, also called the “domestic production activities deduction,” is 9% of the lesser of qualified production activities income or taxable income. The deduction is also limited to 50% of W-2 wages paid by the taxpayer that are allocable to domestic production gross receipts.

Yes, the deduction is available to traditional manufacturers. But businesses engaged in activities such as construction, engineering, architecture, computer software production and agricultural processing also may be eligible.

The deduction isn’t allowed in determining net self-employment earnings and generally can’t reduce net income below zero. But it can be used against the alternative minimum tax.

How income is calculated

To determine a company’s Sec. 199 deduction, its qualified production activities income must be calculated. This is the amount of domestic production gross receipts (DPGR) exceeding the cost of goods sold and other expenses allocable to that DPGR. Most companies will need to allocate receipts between those that qualify as DPGR and those that don’t — unless less than 5% of receipts aren’t attributable to DPGR.

DPGR can come from a number of activities, including the construction of real property in the United States, as well as engineering or architectural services performed stateside to construct real property. It also can result from the lease, rental, licensing or sale of qualifying production property, such as:

The property must have been manufactured, produced, grown or extracted in whole or “significantly” within the United States. While each situation is assessed on its merits, the IRS has said that, if the labor and overhead incurred in the United States accounted for at least 20% of the total cost of goods sold, the activity typically qualifies.

]]>http://www.nicholsaccounting.com/manufacturers-deduction-isnt-just-manufacturers/feed/0When an Elderly Parent Might Qualify as Your Dependenthttp://www.nicholsaccounting.com/elderly-parent-might-qualify-dependent/
http://www.nicholsaccounting.com/elderly-parent-might-qualify-dependent/#respondWed, 17 May 2017 21:50:00 +0000http://www.nicholsaccounting.com/?p=5100It’s not uncommon for adult children to help support their aging parents. If you’re in this position, you might qualify for the adult-dependent exemption. It allows eligible taxpayers to deduct up to $4,050 for each adult dependent claimed on their 2016 tax return. Basic qualifications For you to qualify for the adult-dependent exemption, in most […]

]]>It’s not uncommon for adult children to help support their aging parents. If you’re in this position, you might qualify for the adult-dependent exemption. It allows eligible taxpayers to deduct up to $4,050 for each adult dependent claimed on their 2016 tax return.

Basic qualifications

For you to qualify for the adult-dependent exemption, in most cases your parent must have less gross income for the tax year than the exemption amount. (Exceptions may apply if your parent is permanently and totally disabled.) Generally Social Security is excluded, but payments from dividends, interest and retirement plans are included.

In addition, you must have contributed more than 50% of your parent’s financial support. If you shared caregiving duties with a sibling and your combined support exceeded 50%, the exemption can be claimed even though no one individually provided more than 50%. However, only one of you can claim the exemption.

Factors to consider

Even though Social Security payments can usually be excluded from the adult dependent’s income, they can still affect your ability to qualify. Why? If your parent is using Social Security money to pay for medicine or other expenses, you may find that you aren’t meeting the 50% test.

Don’t forget about your home. If your parent lives with you, the amount of support you claim under the 50% test can include the fair market rental value of part of your residence. If the parent lives elsewhere — in his or her own residence or in an assisted-living facility or nursing home — any amount of financial support you contribute to that housing expense counts toward the 50% test.

Easing the financial burden

Sometimes caregivers fall just short of qualifying for the exemption. Should this happen, you may still be able to claim an itemized deduction for the medical expenses that you pay for the parent. To receive a tax benefit, the combined medical expenses paid for you, your dependents and your parent must exceed 10% of your adjusted gross income.

The adult-dependent exemption is just one tax break that you may be able to employ to ease the financial burden of caring for an elderly parent. Contact us for more information on qualifying for this break or others.